BSP: Amend agri-agra law to boost bank compliance

THE Bangko Sentral ng Pilipinas (BSP) is backing the amendment of the agri-agra law that would allow merging the banks’ loan allocation for the farm sector as a measure to improve banks’ compliance rate, according to a high-ranking official.

Citing BSP data, Land Bank of the Philippines (LandBank) President Alex V. Buenaventura had said the noncompliance of the total banking system with the agri-agra law has reached P460 billion as of end-2017.

BSP Deputy Governor Chuchi Fonacier said the Central Bank is in favor of consolidating the 25-percent loan allocation requirement for agriculture and fisheries sector as mandated by Republic Act 10000, or the Agri-Agra Reform Credit Act of 2009.

Under the agri-agra law, government and private banks should allocate 25 percent of their total loanable funds to the agri-fisheries sector with 10 percent being distributed to agrarian-reform beneficiaries (ARBs) and the remaining 15 percent to the farm sector.

“We would of course support the amendment, for the law to be effective. Why not?” Fonacier told reporters in an interview on the sidelines of an agriculture-finance forum at the University of Asia and the Pacific on May 17.

“We need to address some points in the law that would make it effective. We are aiming for a 100-percent compliance [by banks on the law],” Fonacier added.

However, Fonacier is cognizant that amending the law itself would not guarantee an instant 100-percent compliance from the banks but would still pave the way for “improvements.”

She said it “may be a good chance of attaining the 100 percent, but it is not a guarantee.” Nonetheless, she added, “it [will] definitely improve [the] compliance profile.”

At present there are no bills filed in Congress that seek to amend Republic Act 10000 or the agri-agra law. However, the BSP official said, a study funded by the Asian Development Bank (ADB) has been completed on the possibilities of merging the 10-percent to 15-percent requirement under the agri-agra law.

The study was conducted by an interagency committee spearheaded by the BSP, together with the departments of Agriculture and of Agrarian Reform and the ADB.

Fonacier said they expect the results of the study to be finalized and released within the next two to six months.

Fonacier added that the results of the study may kick-start the crafting of a bill that would pave the way for the amendment of the law.

“It will depend on the results but that will open the door for amendment and consultation. There is no draft bill yet, [as] we are waiting for the results [of the study],” she said.

Fonacier added some senators, including Sen. Cynthia A. Villar, who chairs the Senate Committee on Agriculture and Food, are supporting the amendment of the agri-agra law, “because they are not happy with the compliance. Even legislators like Senator Villar knows that there is a study. And she is also just waiting for the result,” she said.

Fonacier said the banks’ compliance rate in 2017 for their 15-percent loan allocation mandate for agriculture is only 12 percent, while they only reported a mere 1- percent compliance rate for the 10-percent loan distribution for ARBs.

Fonacier said banks posted a 12-percent compliance rate for their 15-percent mandated loan allocation for agriculture in 2017. As for the 10-percent loan portfolio distribution for ARBs, banks were only achieved a mere 1-percent compliance rate, according to Fonacier.

Citing BSP data, Buenaventura said LandBank is reviving their “direct marketing by supervised credit technicians” program to “ensure all small farmers gain access to financing.”

Through this program, Buenaventura added, the LandBank would be the one reaching out to farmers, instead of them going to the financial institution.

“So what we will do now is that the LandBank will go to the farmers. So access is our first strategy,” he said. “Farmers will no longer have to face difficulties finding LandBank. LandBank will go to the farmers and not farmers going to LandBank.”